S.N.

Particulars

Rate

Description

1.

TDS on Salary

Slab

Sec 87(1) of Income Tax Act describes that the employer shall withhold tax of the employee by calculating the actual tax liability of an individual employee using the slab rates prescribed. All the inclusions, and deductions need to be considered while calculating the tax liability of employee.

2.

TDS in interest

5%

15%

• As per sec 88(3), the TDS on interest is 5% when the recipients is a natural person and the payment is done by resident bank, financial institution, cooperatives, or any entity issuing bonds or company listed under prevailing laws. Payment shall be made in connection to deposit, bond, and debenture. Also the payment should not be in connection to operation of business.
• Otherwise, the rate is 15%.
• No TDS is applied when the Interest is  paid to a resident bank or financial institutions

3.

Royalty

15%

Sec.2 (kaka) defines royalty as the payments made for the lease of the intangible assets and also the payment made for the right to use copyright, patents, design, model, plan, formula, trademark, cinematographic movie, video tape, sound recording etc. But it doesn’t include the payment for natural resources.

4.

Service Fee

1.5%

• TDS on service fee for the payment to VAT registered person is 1.5%.
• Where a payment is made to a non-registered person against non-VAT invoice : 15%

5.

TDS on Commission/sales bonus

15%

5%

TDS on commission where VAT invoice is raised is 1.5% as commission falls under the definition of service fee as per sec.2 (kaMa).-Circular-MAW Enterprises-2069.12.12.But VAT invoiced sales bonus attracts TDS of 15%.

Payment of commission to non-resident by the resident employment agency attracts the TDS of 5%.It basically applies to a resident manpower company.

6.

Payment of Dividend

• 5%

When the dividend is distributed by the resident company or partnership. And it is final withholding-5%.

Dividend tax is exempted if distributed by the cooperatives listed in sec.11 (2) of the act.

7.

Payment of Rent

1.5%

10%

• If a rental payment is done for a VAT registered vehicle service provider, TDS is 1.5%.
• In all other cases : 10%
• Where a payment of house/office rent is made to a natural person, amount of TDS shall be deposited to the local level government (wada) at a rate prescribed by their act. However, some of the tax offices are still taking such rental taxes.

8.

Retirement Payments

5%

TDS is 5% on gain if the retirement payments is done from the Govt of Nepal or Approved Retirement Fund or unapproved retirement funds. But the calculation for gain is different in both the approved & unapproved retirement funds.

9.

Payments for Natural Resources/Any other benefits

15%

Payments of Natural resources as per sec.2 (sha) means the payment against the right to extract water, minerals or other living or non-living remains from land or the amount calculated on the basis of rates or quantity of living or non-living remains of natural resources or minerals extracted.

10.

Gain on Investment Insurance

5%

5% TDS is to be deducted for the payment of gain on investment insurance. But, when the payment is made due to the death of any individual, deduction of TDS is not required.

11.

Transportation Service

2.5%

The rate is 2.5% whether it is PAN or VAT bill.

12.

Lease of Aircraft

10%

Payments related to lease of aircraft attracts withholding tax at 10%.

13.

Mutual Fund

5%

0%

Distribution of benefit/return from mutual fund to a natural person attracts the TDS of 5%.

Where a dividend or interest has been paid to a mutual fund, no tax is to be withheld.

14.

Use of satellite, Radio, Optical Fiber…..

10%

Use of satellite, Radio, Optical Fiber, Telecommunication Equipment, or Electricity Transmission Line attracts withholding tax @ 10%.

15.

No TDS applicable(some of them are already mentioned above)

0%

• Payment for publishing articles in a newspaper.
• Payment by a natural person, except where such payments are related to operation of business.
• Payment of amount that have been exempted from tax under various provisions of Income Tax Act.
• Interregional interchange fee paid to a bank issuing credit card.

Cash back from IRD for payment of VAT using electronic means.

16.

Windfall Gain

25%

• Windfall gain means lottery, prizes, tips, winning, or any benefits received suddenly.
• Prize received of an amount not exceeding Rs. 5 lakhs from the contribution made in the field of literature, arts, culture, sports, journalism, science, technology and public administration doesn’t attracts the withholding tax of 25%.
• It is a final withholding tax.

17.

Contracts exceeding Rs. 50,000

1.5%

• As per sec. 89 of the Income Tax Act, a resident person is required to withhold tax on contract payments above Rs. 50, 000 at 1.5%.
• The payments made within last ten days to a same person or his associated person is to be considered for the payment of more than Rs. 50,000.Amount of Rs. 50, 000 doesn’t include the duties and taxes.
• Where the insurance premium paid to a non-resident insurance company: TDS is 1.5%
• In case of payment exceeding Rs. 5 million to Consumer groups: TDS of 1.5% to be deducted.
• TDS of 5% is deducted for the payments of repair or other contract or agreement of aircraft to a non-resident.